The Pensions Regulator (TPR) has shared further details as to how it used its anti-avoidance powers to issue a £1.8m contribution notice against a director, as well as agree a settlement with another, highlighting the case as a "landmark" ruling.

The regulator previously took action against two people in relation to a large cash payment from a subsidiary of MGPS’ employer, Meghraj Financial Services Limited (MFSL), to an entity outside the employer group, the Meghraj Group, an international investment, banking advisory and fiduciary services organisation.

According to TPR's regulatory intervention report, TPR found that, in 2014, a subsidiary of MFSL, Meghraj Properties Limited (MPL), directed a payment of £3,688,108, funded by the sale of shares in an overseas joint venture, to be made to a nominee company associated with a director of MPL.

However, the regulator said the money should instead have been used to fund the defined benefit (DB) pension scheme, arguing that the extraction of the funds from the employer group was materially detrimental.

Indeed, following the payment, the employer and its subsidiary went into liquidation, leaving the scheme with a substantial deficit.

As a result, the scheme entered a Pension Protection Fund (PPF) assessment period in October 2014.

TPR therefore used its anti-avoidance CN powers to require MSFL sole director, Anant Shah, and his nephew and MPL director, Rohin Shah, to pay more than £3m to the scheme.

The decision was then referred to the upper tribunal by the pair, with TPR opting to settle its case against Rohin Shah before the hearing.

However, in what TPR highlighted as a “significant” legal decision, the UT agreed with TPR that it was reasonable Anant Shah pay a CN, which included 50 per cent of the sum that should not have been diverted from the scheme’s employer plus an uplift to take account of the passage of time.

The judgment also accepted TPR’s case more generally that the amount of a CN should be what is reasonable and is not limited to the loss to a scheme resulting from the acts or failures to act.

A CN for more than £1.8m was therefore issued to Anant Shah on 18 August 2023, although the PPF and scheme trustees are still pursuing Anant Shah for payment.

Commenting on the case, TPR interim executive director of regulatory compliance, Mel Charles, said: “Our action against two targets will reduce the pension scheme’s deficit and our report shows how we will pursue those who extract funds to the detriment of scheme members.

“It demonstrates, once again, our determination to investigate complex commercial arrangements and use our powers to ensure we protect members and the PPF.”

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